Mumbai: Beating drums and shouting aloud may have a lot of dramatic value to attract potential bidders, but capital markets regulator Sebi feels these archaic methods for recovery of funds through sale of attached assets are outdated and there are several newer alternatives that can yield better results.
The ‘outdated’ provisions have caught the eyes of the Securities and Exchange Board of India (Sebi) during a review of recovery powers available to the regulator, which it exercises when someone fails to pay penalties or fees or defaults on regulatory orders.
In consultation with the Ministry of Finance, the securities market regulator is considering drafting separate recovery rules to recover penalties, fees, disgorgement amount and refund orders made under the Sebi Act, officials said.
The watchdog is required to apply relevant provisions of the Income Tax Act, as in force from time to time, while taking into account necessary modifications to the tax law, for recovery purpose. However, Sebi has told the government that it may be difficult to keep a tab on the amendments made to the income tax laws and there might be ambiguity as to how the changes would be made, whether by the Act, rules or regulations, officials said.
“Furthermore, some provisions of the IT Act are outdated, such as beating of drums and public auction. Newer methods like newspaper advertisements and e-auction provide better results and are efficient,” an official said, citing a presentation made by Sebi.
Sebi had asked the government to make necessary provisions in the laws to enable it to make regulations and amendments to provide for faster and efficient methods for recovering monies.
In reply, the Ministry of Finance told the regulator that the power to modify the Income Tax Act provisions for recoveries to be made under the Sebi Act should vest with the central government and therefore modifications need to be prescribed through rules made by the government.
The Ministry also suggested that the regulator might draft separate recovery rules specific to the Sebi Act and in that event, the current provision with respect to modifications in the income tax provisions might be deleted altogether from the rules and regulations governing Sebi’s recovery powers.
Officials said, that the regulator is keen to consider the second alternative as an expert committee constituted by it is as such in process of making recommendations in the matter of comprehensive regulations for recovery process.
